Fall Semester 2007
FIN 357: Business Finance
Unique 03065: MW 2:00 pm – 3:30 pm, UTC 1.132
Instructor: Dr. Ramesh K. S. Rao
Office: CBA 6.304E
Office Hours: MW 9:45 am – 10:45 am & 1:00 pm – 1:45 pm or by appointment
Telephone: 475-8756
E-mail: ramesh.rao@mccombs.utexas.edu
Teaching Assistant: Anita Nadeem
Office: CBA 4.304A
Office hours: TTh 11:00 am – 12:30 pm & W 3:30 pm – 4:30 pm or by appointment
Telephone number: (512) 215-4059
E-mail: anita.nadeem@bba05.mccombs.utexas.edu {msbbe425}
The Provost has asked that the following be added to all syllabi:
The University of Texas at Austin provides upon request appropriate academic
accommodations for qualified students with disabilities. For more information,
contact the Office of the Dean of Students at 471-6259, 471-4641 TTY.
Course Objectives
This course has the following objectives:
• To introduce the concepts and theories of modern financial management,
• To develop an appreciation for the usefulness of these theories for financial
decision making
• To develop the student's financial decision-making skills,
• To provide an overview of current financial management theories and practices.
Required Materials
Text: Corporate Finance by Ross, Westerfield and Jaffe, 8th ed. McGraw-Hill Irwin,
2007 (ISBN: 978-0-07-333718-0)
Supplemental Chapters: Selected chapters (available on Blackboard) from Financial
Management, Concepts and Applications, 3rd ed., 1995, Ramesh K.S. Rao,
SouthWestern Publishing Co., Cincinnati, a division of International Thompson.
Course Structure:
The course consists of lectures, quizzes (three), a mid-term exam, and a
comprehensive final exam.
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Lectures: The lectures are designed to provide an understanding of the major
elements of finance. The emphasis is on the logic underlying each concept, on
how each concept is used in finance and on how the concepts are interrelated.
The lectures are not note-taking drills; rather, they are dynamic sessions in which
information is presented by the instructor via visual aids and through direct
interaction with the class. Lecture Notes are posted on Blackboard. Internet usage
during class lectures is not allowed.
Quizzes (3 quizzes, 50 points each). These in-class quizzes will be announced in
advance; details will be discussed in class.
Exams (250 points) (Midterm, 100 points and Final, 150 points): Each exam
will contain two sections, Section I with multiple choice questions (quantitative
and qualitative) and Section II with “short answer” questions (qualitative and
quantitative). Students who understand and solve the recommended problems
should have little difficulty in answering the quantitative problems in the exams.
A sample midterm is posted on Blackboard (these may not reflect the
precise scope of your exam). Note that the sample exam is just to illustrate the
format of the exam. The actual exam may vary in the level of difficulty or number
of questions. The final is comprehensive (same format as midterm). No sample
final exam will be provided.
Course Policies and Administrative Procedures
Grade Appeals: All grades are assigned after a careful examination of the work
submitted. Any grade disputes for quizzes should be submitted in writing to the
instructor after 24 hours but within one week of the receipt of the disputed quiz.
No adjustments will be made after this one-week period. Appeals to grading of
mid-term exams can be made after 24 hours but less than two weeks from the time
when the grades are put up. The appeals should be made in writing to the TA. The
final exam will not be returned. Students wanting to review their final or appeal
their overall semester grade must do so with the TA during the first two weeks of
the following semester. Exams will be destroyed after that period.
Exam Rules: Download from Blackboard and bring Time Value tables. You can
also bring one formula sheet (one-side, 9” x 11”). Writing down any information
other than formulas will be considered cheating.
No laptops are permitted during the exams. You can bring in a calculator.
No exceptions to rescheduling the midterm and final exam dates (internship
searches and travel are not acceptable excuses). Students missing exams for valid
(e.g., medical /bereavement) reasons must notify the instructor in advance, where
possible, and provide documentation if requested (they will have the final exam
weighted proportionally more).
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Scholastic Dishonesty:
Policy on Scholastic Dishonesty: Students who violate University rules on scholastic dishonesty are subject to
disciplinary penalties, including the possibility of failure in the course an/or dismissal from the University.
Since dishonesty harms the individual, all students, and the integrity of the University, policies on scholastic
dishonesty will be strictly enforced. You should refer to the Student Judicial Services website at
http://deanofstudents.utexas.edu/sjs/ or the General Information Catalog to access the official University
policies and procedures on scholastic dishonesty as well as further elaboration on what constitutes scholastic
dishonesty.
Tentative Course Outline
In the schedule below “RWJ” refers to the Ross, Westerfield and Jaffe text (8th edition),
and “Rao Chapter” refers to chapters in the Rao text (available on Blackboard and in the
Copy Center).
MODULE 1 (approx: 6 classes)
Introduction to Corporate Finance, Discussion of Course Structure and Policies
RWJ Chapter 1. Introduction to Corporate Finance
Readings:
Rao Chapter 1. The Firm and its Environment
Rao Chapter 2. Maximizing Stockholders' Welfare
Value
RWJ Chapter 4. Net Present Value (Discounted Cash Flow Valuation)
RWJ Chapter 5. How to Value Bonds and Stocks
Recommended problems from RWJ textbook:
Chapter 4: Problems 3, 6, 8, 10, 12, 17, 19, 26, 27, 29, 33, 36, 41, 50
Chapter 5: Problems 4, 6, 9, 10, 11, 14, 16, 17, 26, 28
Printer-friendly time value tables and time value formulas posted on Blackboard.
“Financial Functions in Excel,” posted on Blackboard
QUIZ 1
______________________________________________________________________
MODULE II (approx: 5 classes)
Capital Budgeting
RWJ Chapter 6. Some Alternative Investment Rules (Net Present Value
and Other Investment Rules)
RWJ Chapter 7. Net Present Value and Capital Budgeting (Making
Capital Investment Decisions)
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Recommended problems from RWJ textbook:
Chapter 6: Problems 2, 4, 7, 9, 13, 26, 27, 28
Chapter 7: Problems 1, 3, 7, 9, 10, 12, 18, 21, 22, 31
QUIZ 2
MODULE III (approx: 6 classes)
Risk
RWJ Chapter 9. Capital Market Theory: An Overview (Risk and Return:
Lessons from Market History)
RWJ Chapter 10. Return and Risk: The Capital-Asset-Pricing Model
Recommended problems from RWJ textbook:
Chapter 9: Problems 1, 4, 7, 10, 14, 15, 23, 25
Chapter 10: Problems 2, 4, 5, 10, 11, 13, 16, 19, 32, 33
MIDTERM EXAM
Covers all materials up to and including Chapter 10 of RWJ and other listed readings.
Make sure that you review the Exam rules and procedures listed earlier.
RWJ Chapter 12. Risk, Cost of Capital, and Capital Budgeting
Recommended problems from RWJ textbook:
Chapter 12: Problems 1, 2, 3, 4, 5, 6, 7, 10, 12, 13
MODULE IV (approx: 4 classes)
Financing Decisions and Market Efficiency
RWJ Chapter 13. Corporate-Financing Decisions and Efficient Capital
Markets
RWJ Chapter 14. Long-Term Financing: An Introduction
RWJ Chapter 19. Issuing Securities to the Public
RWJ Chapter 20. Long Term Debt
Recommended problems from RWJ textbook:
Chapter 13: Problems 1, 3, 4, 7, 8, 10, 13, 14, 19, 21 (Concept Questions)
Chapter 14: Problems 1, 2, 4, 5, 6, 7
Chapter 19: Problems 1, 2, 3, 13, 14, 15, 17, 18
Chapter 20: Problems 1, 2, 3, 4, 5, 6, 7, 8
QUIZ 3
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MODULE V (4 classes)
Financial Distress and Dividend Policy
RWJ Chapter 18. Dividend Policy: Why Does It Matter?
Rao Chapter 16. Resolving Financial Distress
Recommended problems from RWJ textbook:
Chapter 15: Problems 5, 6, 8, 12, 13, 16, 17, 20, 21, 24
Chapter 18: Problems 6, 7, 8, 9, 14, 15, 16, 18, 20, 21
________________________________________________________________________
Final Exam Review
(Time permitting) Overview of Miscellaneous Topics
FINAL EXAM (COMPREHENSIVE)
Make sure that you again review Exam Policies
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